Trading’s goal is money. It always was and it will always be. Whether you’re trading your foreign currency to a friend who goes abroad, or you’re trading different currencies in the forex market, modern trading is about the money too. It’s mainly revolving around the major currencies: U.S. dollar (USD), Euro (EUR), Japanese yen (JPY), Swiss Franc (CHF), Australian, Canadian and New Zealand Dollar (AUD, CAD and NZD), Great Britain Pound (GBP). They are traded in pairs (USD/GBP, JPY/USD). All the major currency pairs contain the mighty USD.
You basically buy and sell different combinations of currencies.
The process of trading in forex is pretty simple. You exchange one currency for another expecting that the price will increase and the currency you purchased will have a bigger value than the one you chose to sell. The exchange rate refers to how a currency is valued comparing to another one. For example, the USD/EUR exchange rate shows how many euros you can buy with one dollar or how many dollars will you get for one euro. Right now, the rough exchange rate is 1 USD= 0.72 EUR and 1 EUR=1.39 USD. When you’ll trade, you may have to make very accurate estimations for a certain period of time.
The currency on the left (the first one) is the base currency and the one on the right of the slash is the counter or quote currency. For example USD/ GBP – USD is the base currency and GBP is the quote one. When you buy, the rate will tell you how much you need to spend in units of the quote currency to buy one unit of the base currency. When selling, it’s the other way around. You will buy the pair if you think the base currency’s value will increase and sell it if you think it will depreciate relative to the quote one.
Let’s take a real trader’s action. For example, you buy 10,000 dollars at the USD/ EUR exchange rate of 0.7500 because you estimate that the U.S. dollar will gain in value soon. After two weeks, you exchange your 10,000 dollars back into euros at a different exchange rate – the current one of 0.8200. You’ll make a profit of 700 EUR. This is how you make money.
Trading is neither too easy, nor too complicated. Forex trading is a great opportunity to make money for some people. Don’t just rely on luck, gain important knowledge about the industry and take it step-by-step. In a short time, you’ll be able to make money yourself through trading platforms that makes everything happen. When you are decided to start trading, create an account on StockPair. It’s the most reliable and trustworthy one in the industry. Good luck!